520 Phil. 801
CORONA, J.:
That for and in consideration of the above-mentioned sum received by way of a loan, and other credit accommodations of whatever nature obtained by the Borrower/Mortgagor, the Borrower/Mortgagor by this Agreement, hereby constitutes a first mortgage, special and voluntary over the property/ies specifically described in Annex "A", together with all existing improvements as well as those that may hereafter be made to exist or constructed thereon, inclusive of all fruits and rents, in favor of the Bank, its successors and assigns. [2]When Transbuilders failed to pay its P15M loan within the stipulated period of one year, the bank restructured the loan through a promissory note executed by Transbuilders in its favor. The pertinent provisions of the promissory note[3] stated that:
Petitioners aver that they were not informed about the restructuring of Transbuilders' loan. In fact, when they learned of the new loan agreement sometime in December 1996, they wrote BPI-FSB requesting the cancellation of their mortgage and the return of their certificate of title to the mortgaged property. They claimed that the new loan novated the loan agreement of March 24, 1995. Because the novation was without their knowledge and consent, they were allegedly released from their obligation under the mortgage.
- The proceeds of the Note shall be applied to loan account no. 21108336[4]; and
- The new obligation of Transbuilders to respondent Bank for fifteen million (P15,000,000.00) shall be paid in twenty (20) quarterly installments commencing on September 28, 1996 and at an interest rate of eighteen (18%) per annum.
The mortgage contract between the petitioners and the respondent BPI does not limit the obligation or loan for which it may stand to the loan agreement between Transbuilders and BPI, dated March 24, 1995, considering that under the terms of that contract, the intent of all the parties, including the petitioners, to secure future indebtedness is apparent'. On the whole, the contract of loan/mortgage dated March 24, 1995, appears to include even the new loan agreement between Transbuilders and BPI, entered into on June 28, 1996.Petitioners moved for a reconsideration of the decision but were unsuccessful. Hence, this appeal.xxx xxx xxx
There is likewise no merit to the petitioners' submission that there was a novation of the March 24, 1995 contract. There is no clear intent of the parties to make the new contract completely supersede and abolish the old loan/mortgage contract. The established rule is that novation is never presumed. Novation will not be allowed unless it is clearly shown by express agreement, or by acts of equal import. Thus, to effect an objective novation it is imperative that the new obligation expressly declares that the old obligation is thereby extinguished or that the new obligation be on every point incompatible with the new one. (Ajax Marketing & Development Corporation v. Court of Appeals, 248 SCRA 222 [1995]) Without such clear intent to abolish the old contract, there is no merit to affirm the existence of a novation.
There is no basis therefore, to the charge that respondent BPI had gravely erred in not surrendering the petitioners' certificate of title, as the mortgage undertaking of the petitioners has not been cancelled. For the same reason, the respondent BPI acted within its prerogative when it initiated extra-judicial foreclosure proceedings over the petitioners' property.
WHEREFORE, premises considered, the instant appeals from the Decision of the Regional Trial Court of Iloilo City in CA-G.R. SP No. 45887 and the Order of dismissal of the Regional Trial Court of Manila in CA-G.R. SP No. 45629 are hereby DISMISSED.
SO ORDERED.[5] (emphasis ours)
Article 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.The cancellation of the old obligation by the new one is a necessary element of novation which may be effected either expressly or impliedly. While there is really no hard and fast rule to determine what might constitute sufficient change resulting in novation, the touchstone, however, is irreconcilable incompatibility between the old and the new obligations.[7]
In every novation there are four essential requisites:(1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; and (4) validity of the new one. There must be consent of all the parties to the substitution, resulting in the extinction of the old obligation and the creation of a valid new one. The acceptance of the promissory note by the plaintiff is not novation of the contract. The legal doctrine is that an obligation to pay a sum of money is not novated in a new instrument by changing the term of payment and adding other obligations not incompatible with the old one. It is not proper to consider an obligation novated as in the case at bar by the mere granting of extension of payment which did not even alter its essence. To sustain novation necessitates that the same be declared in unequivocal terms or that there is complete and substantial incompatibility between the two obligations. An obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified by changing only the terms of payment and adding other obligations not incompatible with the old one or wherein the old contract is merely supplementing the old one.Thus, the well-settled rule is that, with respect to obligations to pay a sum of money, the obligation is not novated by an instrument that expressly recognizes the old, changes only the terms of payment, adds other obligations not incompatible with the old ones, or the new contract merely supplements the old one.[9]